Pension Reforms in the UK: In conversation with Nick Pearce and Will Sandbrook

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Nest Insight and University of Bath Institute for Policy Research (IPR) recently published new research into the UK’s landmark Pension Reforms (1997-2015). By conducting a series of video interviews with individuals that played a key role, the project shares new insights into how and why these landmark reforms were able to take place. Nest Insight’s Will Sandbrook recently sat down with Nick Pearce from the IPR to chat about the most striking findings and untold stories uncovered by the project.

Will: The UK’s pension reform agenda is – quite rightly in my view – seen as a huge success, here at home and by policy-makers around the world. Participation in workplace pension saving has risen to almost 90%, from a low of around half of private sector workers in 2012. As someone who studies public policy, what do you think is most striking in terms of the outcomes of the reforms so far?

Nick: No public policymaking reform agenda is ever perfect and there will always be areas of policy that are contested. What is perhaps most important about the UK pensions reform agenda, that has been implemented in the last 10 -15 years or so, is its comprehensive nature. In particular, the creation of a single tier, higher value Basic State Pension alongside auto enrolment into workplace pension saving, and phased increases in the State Pension Age. This package of reforms, which in the most came from the Turner Commission’s recommendations, is a coherent one whose elements interlock. Of course, there are major challenges to pensions policy today – not least because of low annuity rates – and the UK still has relatively frugal pension provision compared to many other advanced economies. But it has put in place a framework of coherent reforms that has secured significant improvements in the value, reach and long-term sustainability of the Basic State Pension, and a major increase in workplace pensions saving rates.

Will: It’s been a pleasure working with you on this ‘oral history’ project, and we’ve been fortunate that so many of the people involved in bringing about the reforms were willing to speak to us. I think this is one of those cases where the phrase ‘success has many parents’ is actually really fair – it took a lot of people over a long period to get us to where we are today. You conducted a lot of the actual interviews for the research, what would you pick out as the highlights in terms of the two or three things that were most critical in making the reforms happen?

Nick: The Turner Commission itself was critical. The quality of its members, the way it worked and the consensus it built for its recommendations, shine through the testimonies we recorded. But I would also say that brute politics was critical too: at many stages of the process it took strong political action to secure and then sustain the reform agenda. Finally, I would say that the technical, nuts and bolts, infrastructures of reform – from the databases on which the evidence base was built, to the architecture of Nest itself – are an over-looked component of the reforms. Public policy is constructed on technical infrastructures and they matter.

Will: Part of our aim in doing this project was that it would start to tease out some of the untold parts of the story – the bits that didn’t make it into the white papers and Commission reports. Was there anything that leaped out of the interviews as a surprise to you? Anything you hadn’t heard said before?

Nick: I think there were key moments of political decision which jumped out – from the last minute insertion into a Green Paper referencing what was to become the Turner Commission, to the deal struck between the Treasury, No10 and the DWP on the timing of the re-linking of the Basic State Pension to earnings, to scraps in the Coalition over auto enrolment. The reform process was built on solid evidence and a consensus amongst key players. But high politics and moments of decision – or what academics sometimes call ‘statecraft’ – were critical too.

In a somewhat contrary vein, I would also say that the path dependency of the British pensions system stands out as well. The persistence of basic liberal welfare institutions and policies, and the large role for the private sector in the UK, are very clear from the evidence we have assembled.

Will: In spite of the success of auto enrolment, I think a lot of people would agree there’s more to do in ensuring the pensions system is comprehensive in providing people with the sorts of outcomes they might want or need in retirement. Some of our work in Nest Insight seeks to focus on what more needs to be done – for example in ensuring people approach and reach retirement with better overall financial health and ensuring the mass expansion of coverage doesn’t leave people like the self-employed behind. How do you assess the current state of UK pensions policy? And where are the next challenges for policy-makers and the industry to focus on in your view?

Nick: Yes, clearly there are major challenges ahead for pensions policy. We don’t have full population wide participation in second tier pensions saving and too many people are not saving enough. Low annuity rates mean that even when people do save well, they are facing retirement on lower incomes than they could have expected twenty or so years ago. The system could obviously be more redistributive.  And it was very clear from our interviews that the freedom and choice agenda is very disruptive – it breaks the fundamental contract between the state and the saver that the purpose of a pension system is to provide a secure income for retirement.

Will: Bright Blue and the Fabian Society recently published a report calling for a new Pensions Commission, as part of their series on building and maintaining consensus in pensions policy. And ‘consensus’ was obviously a massive theme at the heart of this research. What do you think of the idea of a new Commission? What would its role be and what would need to happen to ensure it was a success?

Nick: A lot has changed since the Turner Commission was created, and the problems we currently face in pensions policy probably warrant a fresh policy process. Some of the key success factors for the Turner Commission could doubtless be replicated in a new Commission – the size, composition and widened remit, for example. But other factors, not least the critical role of political actors, cannot be assumed from the outset. I suspect that the state also needs to do more now too – and you need a government prepared to intervene strategically to shape policy, reform pensions taxation, and so on.

Will: Thanks Nick. It’s been great working with you, Dr Thomais Massala and the team at IPR, to bring together existing information and new insights about these reforms. Our new report, Pension Reforms in the UK 1997 to 2015 (PDF), and series of video interviews have captured an important part of history, and I hope they’ll be a valuable resource for others around the world looking to tackle similar issues.

Further information

To find out more about the research, read the full report, Pension Reforms in the UK 1997 to 2015 (PDF) and watch the summary video of our series of interviews with individuals that played a key role in the reforms.

This was originally posted via Nest Insight on 16 March 2020.

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